Life Insurance Corporation (LIC) may receive the government’s nod to acquire UTI Bank, a move that would give the country’s largest insurance company an entry into the banking sector. At present, LIC holds a 10.38 per cent stake in UTI Bank.

LIC may get the green signal to buy out the 27.44 per cent stake that the Specified Undertaking of the Unit Trust of India (SUUTI) holds in UTI Bank, to take its stake to 37.82 per cent. The move comes at a time when UTI Bank has been asked to find a brand identity. The bank and UTI Mutual Fund have been locked in a dispute over who would get to retain the UTI brand.

According to sources close to the developments, the proposed acquisition would make sense as the bank can build on the strong brand recall of LIC. Finance minister P Chidambaram recently said that the big financial institutions should be in a position to provide the entire range of financial services under one roof. However, for the acquisition of the fast growing private sector bank, LIC would need a nod from the Insurance Regulatory & Development Authority (IRDA).

LIC also holds about 27 per cent in state-owned Corporation Bank. The RBI recently asked UTI Bank chairman and managing director P J Nayak to continue either as non-executive chairman or remain managing director after his term ends in July. Nayak is believed to have decided to put in his papers instead. In 2006-07, the bank became the largest corporate loan syndicator in India. It has been positioning itself as a pan-Asian bank, with branches in Dubai, Hong Kong and Singapore.

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